France looks to India to boost sagging economy

Source :

Last Updated: Thu, Feb 14, 2013 08:11 hrs

Paris: Though France and India have advanced fairly significantly in their negotiations on both the Areva nuclear reactors and the Dassault Rafale combat aircraft, France is looking at India to help boost its sagging economy in several other sectors, notably manufacturing.

Since 2010, France has been steadily losing its edge in manufacturing and this trend accelerated in 2012, recording a jump of 42 percent in the closing of manufacturing units in the country, which numbered at 1087 units eliminating over 24,000 jobs, according to a study by Trendeo, a consultancy.

This trend is set to continue in 2013 as well as a number of very large French companies, including automobile manufacturer Peugeot, which has said that it would close down its plant at Aulnay-sous-bois in suburban Paris, eliminating over 2800 jobs. Hollande had promised during his campaign that the government would ensure that the plant would not be shut down.

However, nearly a year after his victory, the situation at the plant remains the same, with the workers opposed to a rehabilitation plan proposed by Peugeot. Yesterday, the car maker announced its biggest loss ever for a year - at 5 bn euros - indicating the seriousness of the situation for Peugeot.

Other major job losses could come from other leading names such as the flag carrier Air France, white goods maker SEB etc. However, Trendeo says that while Peugeot, Air France and SEB do make the headlines, a large majority of the factory closures go unreported in the media as they concern companies employing less than 100 persons and often less than 10. The only sectors that have created jobs in France include green technology, construction, space and aeronautics, says Trendeo.

Faced with this situation at home, Hollande will exhort Indian businesses to come and invest in France and outline the various incentives and subsidies proposed by the French government to attract businesses. Informed sources say that this message would be at the top of Hollande's agenda when he addresses the Indian business community, first in Delhi, and then in Mumbai.

But his message is expected to be received with a generous pinch of salt as France is currently engaged in a very high-profile battle with the steel giant, ArcelorMittal, over the fate of its factories in France. French Industry Minister Arnaud Montebourg has been engaged in a frontal battle with Mittal over the Florange foundry in Lorraine in eastern France where ArcelorMittal would like to shed some 630 jobs in order to make its operations in France sustainable.

Montebourg threatened nationalisation of the plant in order to save it, even though he was dressed down by Prime Minister Jean Marc Ayrault and who announced a deal of sorts with Mittal in December. However, the deal does not seem to have satisfied the workers who continue to protest.

Indian industry is already reticent to invest in France due to its cumbersome laws governing hiring and firing and very heavy social charges attached to each job created. It would be hence upon Hollande and his delegation comprising of several investment agencies to convince that doing business in France is not only attractive financially for the Indians but that the government has made doing business in France a simpler, more flexible and transparent process.